How could the regulatory and enforcement environment around conduct risk evolve over the next 18 months?
We anticipate a conduct enforcement shock for a nonfinancial brand. If you’ve ever bought a car with dealer-arranged financing, opened a store credit account or banked with your local supermarket, these are the providers potentially exposed.
We expect to see the world’s regulators beginning to agree on certain universal types, patterns and definitions of human misbehavior. The resulting rules may be applied domestically or transnationally.
We should expect an increase in the number of cross-sector and international regulatory initiatives and alliances.
We anticipate the failure of consumer-focused debiasing
initiatives. Reasonably enough, regulators are concerned that too many consumers buy financial products as a result of poorly executed decisions. In practice, however, the regulatory demand that providers identify consumer biases and help them to overcome them is unreasonable.
As a reflex response to new forms of market shock, such as Brexit and other geopolitical uncertainties, we expect regulators to consolidate and further extend their powers of enforcement. Financial providers could begin to ramp up organized resistance to any further regulatory burdens.
We expect one notable effect of enhanced personal accountability to be a deterioration in the quality of individuals applying for senior management roles, and the “juniorization” of roles for people already in their positions.
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